How to Invest in Your Success
Anya Kamenetz, the world’s leading expert on higher education and author of the New York Times bestseller The Wealthy Barber and the Low Life in Vogue, just published a brand new book, Educate to Make the Rich Richer.
She explained to me how the average American person’s investment in higher education has waxed and waned over the last four decades.
Higher education was essential for the new economy that emerged after World War II. But the economic boom of the last quarter century has taken tuition soaring upward along with the incomes of college-educated workers, causing many to wonder if college is even worth it.
Author Kamenetz is here to remind us that attending college brings far more benefits than it costs us. The key word here is “invest”. It may not be cheap, but the return on investment is tremendous.
Here are just a few reasons to invest in higher education:
1. Your 401k account.
If you don’t own a company’s 401k account, your money will probably go straight out the door. If you can afford it, invest in your employer’s account instead.
At Vanguard, your company’s 401k will typically match 50% of the amount of money you contribute. That’s a great investment return.
If you can’t afford it, invest in a 529 savings plan, which is a state-run account that you can fill with a variety of investments. These can be very low cost and are a great way to be sure that your money goes to your kids’ future education.
2. Your future.
According to the Economic Policy Institute, the average contribution rate for a lower-income worker is 3%. The average higher-income worker is putting in 9%. If you invest 6% of your income in your 401k, it will build wealth over time. Just remember that it’s not just about money, it’s about creating a strong relationship between your money and your future self.
3. Your prospects.
The top 1% in this country earn on average 24 times more than the bottom 1%. From 1910 to 2000, education was the thing that allowed the middle class to buy a house and raise a family. For a while, it was still the driving force for upward mobility.
That all changed in 2008, when the Great Recession brought a brutal contraction in the middle class. A lot of students in recent years have been living at home and taking jobs like teaching to put food on the table. That shouldn’t be the case.
Without a college degree, the odds of escaping a low-income family and moving up the income ladder and into the middle class become extremely long. Taking college courses is one of the best ways you can protect your future with the most immediate investment in your current self.
4. Your happiness.
You wouldn’t buy a house on a ten-year lease, so why would you buy a lifetime of education? How can you put a price on happiness? You can’t. For many people, attending college makes it possible to achieve well beyond their wildest dreams.
If you ask 2-year-olds, they will say “Let’s go to college.” That’s the fundamental truth. If you’re a single person, whether married or not, do yourself a favor and build the future you’re hoping for. College is the top way to do it.